The accounts payable department is the heart and soul of a business. The importance of AP is exactly what makes it the prime target of fraudulent actions. This fraud can come from various areas, inside the business and outside the business, unintentional or intentional fraud, and so on.
Invoice fraud is the most common form of fraud that can occur in the AP workflow of a company. This article highlights invoice fraud and the best ways to prevent your company from falling victim to it.
What is invoice fraud?
Invoice fraud is fraud where someone tells you that your supplier payment deals have changed and gives you the wrong details. This is called invoice fraud because you are making the wrong invoices for the fraudster and end up losing a lot of money (That’s why it is a fraud.) This is a matter of grave concern, and you need to make sure that this doesn’t happen to you or your company.
Even if this fraud occurs once, it is problematic for your company. This is because once the fraudulent transaction takes place, there is no telling that the details won’t be saved and used for a later transaction. If it is a big amount, paying it twice can really harm your company’s capital. You need to absolutely make sure that invoice fraud doesn’t occur in your company. The next section is going to cover how you can prevent invoice fraud.
Ways to prevent it
There are many ways to prevent invoice fraud; the first and foremost is to stay wary of your AP workflow. Automating your AP workflow can also help increase the chance of this fraud not happening to you. Here are a few ways how you can reduce the chances of invoice fraud.
Three-way matching
Three-way matching is a way to verify whether an invoice you have approved is right or not. It is a simple fix to an otherwise risky transaction. What you do is that you check your invoice with the purchase order and the receipt of goods. This is a lengthy but safe way to go about the transaction because not many frauds will bother making three fraudulent documents.
Watching Invoice amounts
Invoice amounts can also be a good parameter for checking whether there’s potential fraud happening or not. In companies, after a certain threshold, there’s a check on the transaction. Fraudsters are careful about this and make transactions right below that specific amount. You need to be careful of this and check such transactions which are tending close to the threshold.
Lessons of Morality
As mentioned earlier, fraud can be caused by a person on the inside. This is an issue that needs to be addressed in such a way that it doesn’t drop the morale of the company but needs to be upheld in such a way that it maintains the morals of the employees. After all, it is obvious that a happy employee is much less likely to cause fraud and probably even catch fraud.
Check with Vendors
The best way to find who’s a fraud and who’s not lying is in the name and details. If it is a fraud, they’ll most likely be registered under a false name or have some fake details. You need to be aware of this while making the transaction, making sure that the fraud doesn’t happen while you are looking into it. Checking invoices should be made a common practice in your business to prevent any such case from happening in the future
Invoice tracking
You can cancel a payment while it is being processed in the bank. The problem is, how would you know whether the payment you are making is to a legitimate vendor or a fraudulent party? The simple answer is invoice tracking, through which you can easily tell where the invoice has been sent from and where the transaction is going.
Fuzzy matching
What is fuzzy matching? It is checking whether or not there are duplicate invoices in the mix or not. Duplicate invoices can cause heavy losses to the company, both monetarily and morally. It can cause issues within the company, raise questions regarding the management, and get the vendors to lose trust in the company.
Automation of AP workflow
Automation is the best thing to happen to AP workflows. It cuts down on most of the problems mentioned above. It makes invoice tracking easier, makes fuzzy matching the norm, and makes sure that things are always run by the vendors. Every payment is accounted for by the software appointed by the company to make sure no fraud occurs.
These are some ways by which you can prevent fraud from occurring in your company. Hopefully, you have gained something from this article and will apply the measures in your company.